With roots that date back to the 1930s, value investing is a price-driven discipline that seeks companies whose shares are selling at a discount to their true, or intrinsic, value.
While growth-oriented investors focus on firms whose earnings are growing at a rapid pace, a quality that makes them highly sought after, value investors seek companies that are temporarily out of favor. Their shares may be depressed due to factors ranging from company-specific issues to shifting investor sentiment, poor economic conditions, cyclical trends or an overall market decline. Sometimes they’re being ignored by the market for no good reason.
Over the past 25 years, three factors have amply made the case for the value style of investing: performance, diversification and risk control.
* Performance: First and foremost, value investing as a strategy has done well over time, rewarding investors with strong risk-adjusted performance. That has certainly been true over the past quarter-century.
Additionally, it is important to note that dividends have and continue to be a significant component of the stock market’s total returns – and particularly...
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